Personal Loans What You Need To Know

Personal Loans - What you​ Need to​ Know
A personal loan is​ a​ kind of​ obligation or​ debt that is​ generally made for family or​ domestic purposes .​
It is​ not meant for business,​ or​ for long duration mortgage use .​
The financer lends money to​ the​ borrower,​ and the​ borrower needs to​ return the​ full amount to​ the​ lender,​ but not necessarily on​ a​ regular basis .​
It is​ an​ interest-based debenture loan .​
It could be both a​ secured as​ well as​ an​ unsecured loan .​
If it​ is​ a​ secured loan,​ the​ lender asks for collateral,​ whereas in​ the​ case of​ an​ unsecured loan,​ there is​ no demand for any guarantors or​ added assets.
However,​ though lenders may not require guarantors,​ a​ few banks do ask for them,​ along with collateral in​ the​ form of​ added assets .​
So,​ apparently,​ there is​ no standard form of​ rules .​
Variations are inevitable in​ case of​ terms and conditions as​ well as​ the​ eligibility criteria,​ depending on​ the​ fundamental principles of​ lenders .​
You need to​ scrutinize these in​ advance to​ avoid future complications.
Purpose of​ a​ Personal Loan
This loan can be used for any purpose,​ without any supervision over its ultimate use .​
Usually,​ personal loans are used for high priced incidentals like tuition fees related to​ school or​ college,​ furniture,​ television sets,​ washing machines,​ cars,​ bikes and the​ like .​
Or,​ to​ fulfill urgent financial needs,​ be it​ a​ grand function in​ the​ family or​ a​ vacation and so forth .​
Such loans enable you​ to​ take care of​ a​ variety of​ expenses like travel,​ medical,​ marriage,​ honeymoon and so on.
You must remember that the​ item that needs to​ be financed through a​ personal loan should have a​ substantial life,​ at​ least as​ long as​ you​ clear the​ debt .​
For example,​ an​ educational loan would certainly have a​ lifetime value,​ so taking a​ hefty loan for it​ would be quite justified .​
But if​ you​ need to​ take a​ car loan,​ and take around four years to​ repay it,​ then the​ car should at​ least remain functional for that period of​ time.
Types Of Personal Loan
Basically,​ there are three types of​ personal loans,​ namely,​ installment loans,​ balloon loans and single payment loans .​
They are as​ follows:
- Installment Loan: These are loans in​ which you​ need to​ return the​ amount of​ money borrowed,​ along with the​ interest,​ in​ monthly installments over a​ pre- assigned time-period .​
This is​ the​ most popular kind of​ loan and people generally opt for this kind of​ loan .​
Auto and car loans come under the​ category of​ such loans.
- Balloon Loan: These loans require you​ to​ pay installments over a​ set period of​ time along with a​ comparatively greater amount of​ money at​ the​ term-end .​
You must ensure that your income level does not decrease during the​ loan term so that you​ can afford to​ meet the​ ‘balloon’ amount in​ the​ end.
- Single payment Loan: This involves payment of​ the​ entire amount of​ money taken as​ a​ loan,​ along with the​ interest rates,​ at​ a​ certain date in​ the​ future.
Personal loans allow you​ to​ overcome an​ acute financial crisis,​ and avert the​ necessity of​ mortgaging your home,​ jewelry or​ other such prized possessions in​ order to​ meet your immediate fund requirements .​
They help you​ to​ keep your family and your assets secure while overcoming unavoidable circumstances,​ without suffering undue loss.
Personal Loans What You Need To Know Personal Loans What You Need To Know Reviewed by Henda Yesti on August 12, 2018 Rating: 5

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